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“X” Marks The Spot

Faced with a saturation of conventional sports programming in mature markets, ESPN’s Steve Bornstein looks for growth on the information superhighway; outside the U.S.; and in a second network that covers bungee jumping, sky surfing, and beach volleyball the sports of a younger generation marked by a single letter.

We don’t ever call them sports `nuts,’ around here,” says ESPN President and CEO Steve Bornstein, taking mock umbrage at an interviewer’s question. “The correct term is sports ‘enthusiasts.’”

Whatever the nomenclature, there are enough of that red-blooded bunch to have made ESPN an icon of popular culture: Syndicated columnist George Will is reported to have said that if all of his cable channels were taken away except ESPN, he probably wouldn’t notice. So many, in fact, that the network last year kicked off a second affiliate, ESPN2, a service that caters to younger viewers those aged 18-34.

While Bristol, CT-based ESPN updates scores in traditional fashion, via on-screen “windows” during broadcasts, Deuce” as the second network is called some viewers last year featured “Jock- and-Roll” scores set to rock music. ESPN has dour faced balding college basketball maven Dick Vitale. ESPN2 has former MTV personality as ‘Downtown” Julie Brown, who has been known to patrol locker rooms asking players how they keep their buns in shape. But perhaps most important while the staples of ESPN remain flagship sports such baseball and foot ball, ESPN2features rough-and-tumble pro hockey, along with “extreme” .sports, such as snowboarding, sky surfing, skateboarding, and beach volleyball.

“All of the sports that I can’t do,” says Bornstein, 42, a bespectacled, youthful-looking man with just a hint of a paunch.

If Bornstein can pinch an inch these days, it’s partly because he’s a couch potato to by corporate conscription: He spends much of his time evaluating his product, an associate says. Given the network’s rapid expansion over the past several years there’s- lots more to follow. While ESPN Radio is affiliated with 275 stations, ESPN International broadcasts in 120 countries. All told, Bornstein says, the network covers 65 sports in 11 languages, transmitting 4,500 hours of original programming each year, excluding ESPN2.

ESPN-which is 80 percent owned by ABC/Capital Cities, with the remainder held by The Hearst Corp.-is the largest cable network in the U.S. It reaches some 63 million homes stateside and has deals with Major League Baseball, the NFL, NHL, CFA, NCAA, NASCAR, PGA, LPGA, and PBA.

Bornstein, also a corporate vice president with Cap Cities/ABC, acknowledges that the network is well positioned to take advantage of a number of trends, including the information explosion and the increasing importance of entertainment-driven businesses in the national economy. ESPN increasingly is a news-gathering operation: Bornstein recently expanded “SportsCenter,” the network’s prime-time anchor program, from 30 to 60 minutes.

“When many people today say they watch ‘the news,”‘ writes sports columnist Frederick C. Klein in The Wall Street Journal, “they mean they tune into SportsCenter.

In addition, the network’s documentaries on such topics as steroid use and autograph fraud remain an industry standard. To boot, Bornstein is accelerating on the information superhighway: Under a joint venture with Prodigy Network  an online information and entertainment service-ESPN offers a sports information data base, ESPNET. The network also makes instructional sports CDROMs, and video games under a joint venture with Sony Corp.

Of course, Bornstein-a former TV cameraman and crew chief before signing on at ESPN in 1980  – faces his share of challenges. Madison Avenue has been slow to board the Deuce bandwagon, he says, though the new network should hit the black “somewhat faster” than the six years it took the original ESPN. Cable industry re-regulation-including the entrance of the Baby Bells into the business-threatens to roil the distribution mix, and channel capacity issues cloud the prospects for expansion. Then there’s the increasing cost of carrying such marquee sports as baseball and football. ESPN reportedly lost $50 million a year on its last Major League Baseball contract, over four years, a factor that caused it to cut back from five games a week to three when it renewed its option in 1993 for six more years.

In addition, Bornstein says, competition is stiffening from both network television and national cable networks such as TNT, HBO, and USA. Even the leverage of some regional players is on the rise: The proposed acquisition of New York‘s Madison Square Garden by ITT and Cablevision Systems, for example, would unite under the same corporate roof MSG Network and Sportschannel, which combined carry games of the New York area’s Knicks and Nets basketball franchises, and the Rangers and Islanders hockey clubs.

A master of one liners-”We don’t want to be roadkill on the information superhighway,” Bornstein says-the executive is curt almost to the point of being confrontational. “I do [have an opinion on re-regulation],” he says, “but I’m not going to talk to you about it,” Meanwhile, he also has a fondness for collecting pithy sayings in the form of framed calligraphy, hung on his office walls: “No Guts, No Glory,” and “Kill The Ones We Eat, Eat The Ones We Kill.” A commemorative World Cup soccer ball rests on a coffee table, and a clutch of Emmy awards sits on the windowsills. Also on the wall is a motorcycle helmet: Off hours, Bornstein says in a conversation with CE Managing Editor Joseph L. McCarthy, he rides the back roads near his Connecticut home on a BMW 750. (Cover story subject Bernd Pischetsrieder would be pleased.)

“As you get older,” Bornstein says, ‘you get bigger toys.” Then, turning playful, he drops the CEO persona. “What kind of toys do you have?”

BASES LOADED

Has television sports reached the saturation point?

Possibly, at least as it’s currently distributed through broadbased broadcast or cable networks. But you’ll continue to see the selection of sporting events increase.

Thus the decision to launch ESPN2, a network that specializes in bungee jumping, sky surfing, and beach volleyball.

All the sports that I can’t do. Generation X sports; what you see the kids doing when you go down to the beach.

What are the early returns?

Demographically, it’s way ahead of our projections. But its franchise cornerstone program, SportsNight, akin to SportsCenter on ESPN, needs to be refined. That will help to separate our two services in the marketplace. Advertising revenues for ESPN2 are slow but on target.

Any concern with the new network that there are fewer members of “Generation X” than there were baby boomers? And that, as a result, there are fewer sports nuts out there?

We don’t ever call them sports “nuts” [laughs]. The correct expression is sports “enthusiasts.”

To answer your question, despite the size of the respective groups, an interesting phenomenon is taking place. The percentage of the younger group that participates in some of the newer sports is larger. Mountain bike racing. Skateboarding. And demographically, in the eyes of many advertisers, the young consumer is a desirable target.

Though it’s not a younger people’s sport, auto racing, covered by ESPN and ESPN2, continues to enjoy almost exponential growth. So, we anticipate there’ll be no shortage of viewers.

BIDDING WARS

How much cannibalization has occurred with the second channel?

Shockingly, very little, though we’re talking about a small universe at this point: ESPN2 reaches only 15 million homes, mostly new viewers. We expect the trend to decay, however, and that some cannibalization will result. That’s where the differentiation challenge comes in.

Any difference in advertising content?

We’re seeing more new-release movie ads on ESPN2. Some soft drink manufacturers do both channels, though ESPN seems to get Diet Coke, while ESPN2 gets Classic Coke and Pepsi, along with Mountain Dew.

Says something about the caloric intakes of the two viewing groups, doesn’t it?

Yeah [laughs].

You say televised sports might be reaching the saturation point. Does that mean a decrease in competition or competitors?

Every time I think that the rights payments for major sporting events might be reaching the peak, somebody like Rupert Murdoch comes along and bids an outrageous amount for the rights to National Football League games.

I think it’s unlikely that any new 24-hour network would be successful right now. But there are promising niche opportunities. Within a couple of years, when regulatory issues over rates and distribution are resolved, channel capacity will expand, and we might consider the launch of a motor sports and a sports news network.

What are you doing to keep the original network fresh?

We continue to explore new concepts: I think the success of the World Cup soccer championship on ESPN and ABC is a prime example of that. And we continue to search out the next America’s Cup, the yacht race many people point to as the moment when ESPN delivered on the promise that we were going to give you unique, original programming.

THE ENTERTAINMENT ECONOMY

Analysts talk about the “entertainment economy.” Is there such an animal?

There appears to be. We’re increasingly becoming a service economy, and the entertainment dollar is becoming a bigger and bigger portion of our budget.

How will you take advantage of entertainment trends?

Primarily through brand extensions. Not so much in products: We’re solicited on a regular basis to slap our name on everything from health clubs to sporting equipment, but I don’t see ESPN sunglasses or sweat socks as a logical business. But we are going to continue to launch new networks and franchises. This year we started ESPNET, a data base news service that is a joint venture with the Prodigy Network, which is a partnership between IBM and Sears.

Computer sports?

Online. We package information and provide access to it: scores, box office information, electronic bulletin boards, and someday customized video, when the system is able to handle it.

Smells like multimedia to me.

We’re experimenting where we think it makes the most sense. Multimedia is important. We certainly don’t want to be roadkill, or a driveby shooting victim, on the information superhighway.

Right now, computer users are more interactive than television viewers, though, of course, that might change. In terms of sports, at least in the short term, interactive TV probably will be confined to customized graphics: say, for example, a viewer’s ability to call up a hitter’s lifetime statistics versus a certain pitcher.

Will ESPN2 be the first to carry virtual-reality beach volleyball?

I certainly hope so.

Does television have the power to make or break a sport by creating a media event, much the way a fashion designer molds taste?

Television can play a part in stimulating interest, depending on how a sport is presented. In the recent soccer World Cup, for example, ESPN focused partly on personalities: Who are they? Guess what: They’re bigger than rock stars in most of the world. We also explained the nuances of soccer, a game most Americans haven’t grown up with. But this approach was successful only in getting viewers to sample the product. Once you sample it, then you either like it or you don’t. In terms of manufactured demand, I don’t think so. Look at the now-defunct North American Soccer League. It had contracts with CBS and ABC, and it failed anyway.

So you don’t see tractor pulls for the mass market anytime soon?

I-Icy, don’t knock tractor pulls. They may not he big in Manhattan, but if you go to any state fair in the Midwest, this is a real sport.

PEACE IN OUR TIME

Enough with sports as games-let’s talk sports as business. As we speak, the owners of baseball franchises are crying poverty, while the players, referring to free agency, say, “Give me liberty or give me death.” What’s your take, and how does it affect the broadcast business?

I have no problem with multimillion-dollar ballplayers, per se, they’re attracting interest and helping to create the product. Even so, in the end, the consumer winds up paying. And in the long run, that doesn’t help to build a fan base and replenish the supply of consumers. The smartest leagues and franchises take a hard look at some kind of a partnership arrangement.

With salary-cap arrangements, revenue-sharing, and the like?

I’m no expert on whether the ideal mechanism is a cap. But it makes sense to have peace between labor and management so you can grow your sport. For ESPN, meanwhile, this cuts two ways. Successful, highly paid players create interest in our broadcast/telecast package, but they also mean, among other things, that we pay more for that package.

 Is pay-per-view either a panacea or a way to sustain both continued salary growth for players and higher revenues for owners?

The short answer is no. Very few franchises sell out every seat they have. If they can’t get you to go to the game, how is the answer charging you in your home? Ultimately, I think pay-per-view undermines fan support. And I don’t see any of the major sports franchises going in that direction.

I think pay-per-view ultimately is a very small business. But there are some attractive aspects to it. Consumers gain choice-that’s always a positive. And if you’re a Lehigh graduate, you may really be able to get all those Lehigh football games [laughs].

INTERNATIONAL ATTRACTIONS

Let’s talk about the international side of the business.

Sports is an international language. And it’s a product that exports well.

What’s the biggest problem operating offshore?

Protectionism, same as for any business. We’re lucky, because sports is perceived to be apolitical, but sometimes we’re painted with the same brush as other news and entertainment operations.

What are the most important regulatory issues confronting ESPN?

The industry is being re-regulated, and there are a lot of unknowns in terms of distribution. What’s the future of personal communication networks? Will there be 75 channels or 500? When will the phone companies make a mark in the cable business? Will there be two wires running into everyone’s home, or one wire? Will consumers be able to choose?

Any technological developments that will revolutionize the industry, the next satellite dish or fiber-optic cable?

Every day we read about new advancements and the potential for telecommunications. If you really want to talk technology, let’s talk sporting goods. There’s a quantum leap between a skateboard today and a skateboard 25 years ago. Racing bicycles are made with space-age titanium alloys.

ESPN2 is about participatory sports. So equipment technology is what’s really driving our business.

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